Living in the "Now"

 

Why Industry Leaders Often Call for "Regulation" of Their Industries

It might seem odd that some leaders of artificial intelligence frontier models might actually favor slowing the rate of such model development by regulatory means. It might seem odd. Why call for restraints?

Historically, industry regulation actually can help the leaders and provide competitive moats.

Google’s development of Gemini 4 Argon  illustrates one of the issues. Basically, frontier model development is open ended: it never stops. So that also means development work and investment never stops. It is an arms race. 

source: Google  

And the problem with arms races is that there is no obvious method of restraint. Competition does not necessarily converge on an efficient stopping point. There may be physical, financial, or technological limits, but there is often no natural point at which the participants independently decide that additional investment is no longer worthwhile.

Each participant's decision changes the payoff to everyone else. The security dilemma is that actions taken defensively by one participant can make the other participant feel less secure. So technological progress can continually move any stopping points. 

“Parity” can exist at any level, from small to very large. And there is an asymmetry between the output gains and the input investment. Each additional increment of capability might not be worth all that much (it allows a firm to keep pace) but falling behind could be extremely costly (a firm loses the ability to lead the “winner takes most” market in share or profits). 

It’s a positive feedback loop, very much similar to the cat-and-mouse game played by hackers and security professionals. 

In other words, firms need to keep investing and keep running simply to stay in the same place, and, over time, customers might have trouble distinguishing between competitor offers. 

But economic or financial constraints should eventually develop. Already, frontier model developers are facing resistance from financial interests that want to see revenue produced by all the investment. Political resistance also is growing. 

So constraints seemingly will be imposed by external forces, and not market competition. At least so far, the marginal benefit of additional investment arguably outweighs the cost, as frontier models are striving for artificial general intelligence. 

So contestants themselves are unlikely to “naturally” restrain investment levels. But external forces seemingly are gaining strength in the form of calls for lawmakers to “do something” about regulating AI. And even industry leader calls for some restraint while justified on ethical concerns, also strengthen the demand for some external regulation.

SpaceXSI is Not Playing a Traditional "Telecom Services Game"

Ignore for the moment the suggestion that SpaceXSI already is among the largest communication service providers globally, if one measures only total firm revenue. Starlink's revenue is in the $17 billion range, so Starlink alone would not show on this list.

But maybe that is not the point. Maybe Starlink’s ultimate value is its support of the other higher-valuation revenue elements that would come to depend on Starlink connectivity. So the game SpaceXSI is playing is not necessarily “telecom service” but compute, and connectivity is an essential underpinning of that business.



source: Economic Planning Council

Telecom subscriptions generate cash flow and help finance the constellation, but connectivity could become an enabling asset for SpaceX's ambitions in distributed computing, AI services, autonomous systems and space-based compute.

Conventional telecom model	Integrated AI infrastructure model
Sell a connection to a customer.	Connect an intelligent system to its operating environment.
Revenue depends on subscribers, pricing and data consumption.	Revenue could also depend on the value of the work performed.
Competition focuses on coverage, capacity, reliability and price.	Competition also involves integration with compute, models, devices and applications.
The network is principally an expense-producing asset that earns a return.	The network can be an enabling asset that improves the economics of several businesses.

The point is that Starlink is playing a different game than most telecom service providers. While the direct revenue is helpful, the value arguably lies in the underlying support for other lines of business that have much-higher valuation multiples.

How Big a Competitor to Traditional Mobile Operators can SpaceSXI Become?

Perhaps the notion that SpaceXSI could create a meaningful facilities-based “fourth mobile operator” at reasonable cost is to compare what might be done to what Comcast already has done with its own Wi-Fi network. 

Assume SpaceXSI is able to create a small-cell terrestrial network using existing SpaceX customer locations. In principle, this would allow SpaceXSI to use its low-band spectrum to replicate some of the features of a traditional cellular phone network, without much of the capital investment. 

The analogy to Comcast is that Comcast also uses its fixed network broadband customer base as an “offload” network that reduces its wholesale costs, as data traffic is shifted from the mobile network to the “owned” home broadband network. 

At least in principle, the installed base of Starlink customer terminals might be upgraded so that each also operates as a small cell transmitter for mobile phone service. 

The possible upside is avoiding some building of traditional mobile phone network cell towers. 

Yes, there are many practical issues, ranging from availability of phones able to use the terrestrial frequencies SpaceXSI owns; the extent of coverage that might be possible; what augmentation might have to be done to create a more-robust urban network (since most Starlink customers are in rural areas);  the competitive response by the “big three” facilities-based mobile service providers; and the time and cost required to create all of that infrastructure, versus the revenue upside. 

Still, the key principle remains common: both Comcast and SpaceXSI might replicate the features of a full-fledged mobile phone network at lower cost by leveraging existing assets. 

The functional difference is that Comcast’s Wi-Fi is a capacity layer. It already supplies nationwide coverage using the Verizon network. But offload to its own network reduces the operating cost of buying wholesale capacity from Verizon. 

A Starlink small-cell network would be a coverage layer, replicating the traditional cell tower network.

Comcast’s offloading is about profit margin and operating cost. SpaceXSI’s moves would be about reach: creating the basic network coverage for a terrestrial mobile network. 

The business advantages and issues are different as well. Comcast offloads from rented capacity (per-GB wholesale fees to Verizon) to owned capacity. It only uses unlicensed spectrum for Wi-Fi access, so there is no capital specifically tied up in spectrum licenses.

SpaceXSI has purchased spectrum licenses, so in one respect it has a higher cost base than Comcast does. 

Comcast’s costs to offload traffic are fairly low, whereas SpaceXSI will have a greater cost issue as its satellite capacity is more limited. Also, Comcast’s footprint is contiguous and dense. Starlink’s customer sites are scattered. 

SpaceXSI also will have to concern itself with all regulations governing cell transmitter power levels, for example, something Comcast does not face. 

Comcast’s model is economical because everything it uses is either free (spectrum) or already paid for (backhaul). Starlink’s version is more valuable per node because it provides coverage that doesn’t otherwise exist. But it is much more expensive to run and more heavily regulated.

At a high level, most observers would tend to agree with Comcast executives that the Xfinity mobile service gains advantages by shifting much mobile data traffic to the owned and operated Comcast fixed network.  Even so, nobody outside Comcast really knows what the financial benefits and profit margins might be. 

The larger questions for any SpaceXSI network coverage model based on using existing Starlink receive sites surround the business model: how much market share SpaceXSI might realistically expect to acquire; what its profit margin could be; what its capex and operating costs would be, whether its selection of phones would be commercially competitive. 

But it is basically impossible to clearly quantify the advantages Comcast might possess in using its own fixed network for mobile data access, compared to either a full leased-access model or the alternative of creating a facilities-based mobile radio network.

It might be fair to assume Comcast mobile phone customers use Wi-Fi offload for as much as 90 percent of data traffic, on its owned network and other third-party Wi-Fi sites. 

The central advantage is that Comcast can use a network it already operates to serve a substantial fraction of its mobile traffic. Verizon, AT&T and T-Mobile must generally provide mobile coverage through their cellular networks, including spectrum, radio equipment, towers, transport and core-network infrastructure.

What that implies for the business model is somewhat opaque. If Verizon's wholesale charges vary with traffic, shifting Xfinity customer data traffic onto Wi-Fi instead of cellular can avoid charges on that traffic. However, MVNO contracts can include per-line, minimum-volume and other charges, so the savings will not necessarily be proportional to the traffic shifted.

And, of course, Comcast can add mobile customers without having to construct a corresponding nationwide cellular radio network.

But it might be fair to assume that Comcast saves up to 80 percent on its data capacity wholesale consumption because it is able to offload much cell phone data traffic.

Of course, there are many other costs for operating the mobile phone business, so we cannot assume the overall savings are that high, compared to a standard MVNO approach. 

And even looking only at wholesale charges, it is not clear what the savings magnitude might be. A carrier may charge a flat wholesale fee per subscriber, or sell pooled data, rather than bill every voice minute and gigabyte based on usage or consumption. 

And the value of wholesale services covers quite some range of potential value that might have some bearing on how the wholesale access is priced, if a separation between “voice features” and “data access” features are evaluated. Hypothetically, that can take any number of forms. 

Some features might be heavily attributed to “voice and messaging” services. Other features might be allocated more directly to data network features. In other cases a blended approach is feasible. Nobody outside Comcast or Verizon knows what the specific pattern might be. 

 

Cost component	Voice allocation	Data allocation	Shared or unallocated
Radio access and spectrum capacity	5–15%	65–85%	10–25%
Core network and packet transport	5–15%	65–85%	10–25%
Coverage, towers, radios and site leases	5–15%	35–60%	30–50%
Voice-specific IMS and calling functions	70–100%	0–5%	0–30%
Customer authentication, SIM/eSIM and subscriber provisioning	0–5%	0–5%	90–100%
Wholesale billing, interconnection and roaming	Contract-dependent	Contract-dependent	Contract-dependent
Retail support, marketing and billing	0–5%	0–5%	90–100%

The point is that data access offload might mostly affect the “wholesale data access” features, but not the “voice and messaging” features. 

Wholesale contract structure	How voice and data costs should be modeled
Per-minute voice plus per-GB data	Calculate the two traffic charges separately, then add shared access costs
Flat monthly fee per subscriber	Allocate the fee using estimated underlying cost drivers; do not treat it as a marginal per-GB cost
Pooled data allowance plus voice allowance	Model the cost of each pool, overage charges, minimum commitments and unused capacity
Retail-minus or revenue-based wholesale pricing	Treat the wholesale payment as a commercial cost, not as a direct measure of network resource consumption

Verizon's wholesale wireless service illustrates the nature of these arrangements. A paper on  Cost allocation of WCDMA and wholesale pricing for mVoIP and data services provides a formal framework for distinguishing service-specific costs from shared network costs.

If Comcast pays Verizon a largely fixed per-line wholesale fee, Wi-Fi offload may reduce Verizon's underlying resource consumption without reducing Comcast's bill proportionally. And Comcast’s operating savings might not be as high as some imagine. 

Really “we don’t know” how much value Comcast derives from data access offload. 

Still, assume SpaceXSI wants to avoid MVBO economics, and initially wants to solve an indoor coverage problem for current home broadband customers who might be enticed to buy a SpaceXSI mobile service. 

Every Starlink home terminal comes with a Wi-Fi router, so a Starlink Mobile plan with Wi-Fi calling and data offload would need little new technology aside from compatible phones and radio transmitters working with SpaceXSI’s spectrum assets. 

The real upside would be a licensed-band cellular radio in or beside the dish, so that a customer’s home becomes a femtocell or small cell. 

Starlink does have a global advantage, though, as its network will eventually cover most of the earth’s surface. On the other hand, getting a comparable low-band spectrum globally will be a complicated and cumbersome prospect. It is a non-trivial endeavor! 

The Dalai Lama is Right

Technology Does Not Eliminate Human Choice

Technological determinism is a recurrent idea, suggesting that technology is a primary force shaping society. The notion is that once a technology appears, its capabilities and economic logic tend to push society toward particular outcomes. But a survey of Goldman Sachs interns suggests the limits of such thinking. 

About 60 percent of respondents prefer no AI involvement in creative work such as art, music, and books. They are comfortable with some AI assistance for content curation, healthcare, shopping, customer service or personal finance, so long as there is human validation. 

source: Goldman Sachs 

In other words, the survey suggests a human response to AI that is not a simple or passive role, despite much “doomerism” about it. 

To be sure, technology creates possibilities. But that does not necessarily mean it is imperative. The telephone could have eliminated face-to-face meetings, but it didn't. Television could have eliminated newspapers, but it didn't. ATMs could have eliminated bank tellers. The automobile made commuting possible but did not make commuting inevitable.

Calculators changed which mathematical skills were economically valuable, but not lower-order operations. When computation became cheap, computation itself became less economically scarce. The value shifted toward applications, data, organizational knowledge and decisions.

The point is that predictions about deterministic technological outcomes have often been wrong. 

Technology	Deterministic prediction	What actually happened	What it illustrates
Telegraph	Near-instant communication would effectively eliminate the importance of distance and perhaps produce a unified world	Distance became less important for information, but geography, politics, culture and institutions remained extremely important	Technology can reduce one constraint without eliminating others
Telephone	Telephones would largely replace face-to-face interaction	Telephone communication became complementary to physical interaction	People value how interaction occurs, not merely information transfer
Radio	Mass broadcasting would create a common national culture and potentially make older media obsolete	Radio became one medium among many; audiences fragmented and new media emerged	New media usually complement as well as substitute
Television	Television would replace newspapers, radio, books and perhaps traditional education	All survived, although their roles changed substantially	Technologies rarely eliminate an entire human activity simply because they can perform part of it
Automobile	Cheap personal transportation would make cities and mass transit obsolete	Cars produced suburbs and highways, but dense cities, rail and walking remained valuable	Technology interacts with urban design, policy and preferences
Air conditioning	Climate would cease to constrain where people live and work	It transformed settlement patterns, but water, energy, geography, culture and economics continued to matter	Removing one constraint doesn't remove the system of constraints
Nuclear power	Extremely cheap electricity would make energy essentially unlimited and transform society	Nuclear power became important but expensive, politically contested and institutionally constrained	Technical potential ≠ economically or politically realized potential
Computers	Automation would eliminate large portions of clerical and administrative employment	Computers eliminated many tasks but also created enormous new categories of work and increased demand for information-intensive occupations	Productivity and employment aren't mechanically inversely related
ATMs	Banks would need dramatically fewer employees because machines could replace tellers	ATM deployment coincided with changes in branch economics, but banks retained many tellers and expanded some branch networks	Lower cost per transaction can increase total demand
The Internet	Physical retail, newspapers, television and other intermediaries would disappear	They were disrupted, but many adapted; new intermediaries emerged	Disintermediation often produces reintermediation
E-books	Paper books would rapidly disappear	E-books became substantial but physical books remained remarkably persistent	Consumers don't optimize solely for technical efficiency
MP3/digital music	Recorded music would become essentially free and traditional music companies would disappear	Streaming created new subscription and platform models; recorded music remained a major business	New technology changes the business model rather than necessarily destroying the activity
Social media	Universal connectivity would produce greater understanding and democratic consensus	It also produced polarization, fragmentation, communities and entirely new forms of political communication	Technology amplifies social forces rather than determining their direction
Online education	Internet video would make physical universities largely unnecessary	Online education grew enormously, but residential universities remained important for social, credentialing and institutional reasons	Education is an institution, not merely information delivery
Remote work	Once high-quality videoconferencing existed, offices would largely become unnecessary	Remote/hybrid work expanded substantially, but many organizations retained physical workplaces	Work has coordination, social and cultural dimensions
3D printing	Manufacturing would move from centralized factories to individuals producing objects at home	3D printing found important niches, but mass manufacturing remained highly centralized	Unit economics and supply chains matter alongside technical capability

Technology does constrain the choice set, though. Once something becomes dramatically cheaper, faster or more capable, people change their behavior. 

Social media reshapes content production, consumption and value. Automobiles changed the geography of cities.

Artificial intelligence can automate many routine operations. But efficiency is not the only key value for humans. People don't optimize every aspect of life for minimum cost, greatest efficiency or least time. 

Often, value is generated by activity itself. Live music, handmade objects, sports, religious services, face-to-face education, crafts, gardening, cooking and all manner of “live” experiences have intrinsic value, so we keep doing those things. 

So the issue is more “what do you do with more free time?” 

AI might allow us to focus more on purpose, meaning, responsibility, relationships and judgment as the need to spend so much time on instrumental activities decreases. As unfashionable as “religion” might be in some quarters, it is possible its value could become more important. 

Humans make choices, even when technology creates possibilities or conditions. We don't always choose efficiency over other values.